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Matching with peer monitoring

Author

Listed:
  • Au, Pak Hung
  • Chen, Bin R.

Abstract

Evidence for positive peer effects in production has been well-documented in empirical studies, and these effects are found to be more significant in teams composed of members with heterogeneous abilities. By modeling peer effect as mutual monitoring between members, we show that the total agency cost is minimized by maximizing skill diversities in the teams. This result provides a novel explanation for why worker heterogeneity can strengthen peer effects.

Suggested Citation

  • Au, Pak Hung & Chen, Bin R., 2021. "Matching with peer monitoring," Journal of Economic Theory, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:jetheo:v:192:y:2021:i:c:s0022053120301654
    DOI: 10.1016/j.jet.2020.105172
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    Citations

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    Cited by:

    1. Barigozzi, Francesca & Cremer, Helmuth, 2024. "Shining with the stars: Competition, screening, and concern for coworkers' quality," Games and Economic Behavior, Elsevier, vol. 144(C), pages 250-283.

    More about this item

    Keywords

    Peer pressure; Worker heterogeneity; Teams; Sorting;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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